Australian GP in jeopardy as row erupts over Melbourne future

25 January 2011

As a row erupts over whether or not the Australian Grand Prix in Melbourne still represents value for money to the Victoria taxpayer, the future of one of the most popular events on the F1 calendar hangs in the balance...

A row has erupted over the future of the Australian Grand Prix in Melbourne after the city's Lord Mayor Robert Doyle argued that the persistently loss-making event has now 'run its course' and Victoria state premier Ted Baillieu conceded that the race may disappear unless mounting costs can be substantially reined back in.

Mr. Doyle unleashed a stinging attack on the grand prix in the Sunday Herald Sun newspaper, warning that annual losses would soon hit the $70 million AUD mark and stating that the event no longer represents value for money for Victoria's state government. The total loss for the past three editions is in the region of £130 million AUD – $49.2 million AUD in 2010 alone, twice the figure of four years earlier – with attendances at a low of just 287,000 in 2009, casting the race's continued presence on the F1 schedule under the spotlight of late.

Mr. Doyle recognised that the pinnacle of international motorsport has brought with it 'glamour, excitement [and] controversy' since it deserted the streets of Adelaide for Melbourne's Albert Park in 1996. The grand prix, he says, has gone on to become 'one of the cornerstones of an events strategy for Victoria' – what he refers to as formerly 'the rust bucket state' – as well as making Melbourne, a city hitherto 'in the doldrums', 'the number one overnight destination in Australia'.

Now, though, he contends that for taxpayers' pockets, enough is enough and that patience with F1's escalating financial demands is wearing thin – and speaking just days after the City of Melbourne signed a lucrative sponsorship deal with the Australian Grand Prix, he contentiously advised that once the current agreement expires in 2015, the race should be canned.

“First, F1 supremo Bernie Ecclestone will pick up his bat and ball and go home,” mused Mr. Doyle of what he describes as four possibilities for the grand prix's future. “Despite best endeavours, the notoriously difficult, contentious and cranky Bernie will take the dollars of either an Asian or oil-rich Middle Eastern state. There will be no successful negotiation. End of story.

“Second, given Ecclestone's ever-more strident calls for a night grand prix, it will move to a purpose-built track either at Avalon or Noble Park, or possibly elsewhere – Sydney or Perth. The problem with Albert Park is that it is a 300-hectare park and a night race means lighting not only for the track, but also for enough of the park to provide patron safety – too expensive. But equally, the cost of a purpose-built track is potentially $300 million AUD and is probably untenable.

“But even if such a track were built, it would not have the same romance or cachet as Albert Park. The grand prix would become one of those events we sometimes see out of Asia – empty stands, but a worldwide TV audience of hundreds of millions. To me, that wouldn't really be an Australian Grand Prix, just a TV event.

“A third option is that the race remains at Albert Park. That would require an upgrade of the park, costing up to $8-9 million AUD. It would require Ecclestone to accept that the Australian Grand Prix will never be a night race, though with Ron Walker's extremely able negotiation, it has become a twilight race. In its present form, it satisfies both local and TV audiences for real time and reasonable time zone viewing. Sponsorship and advertising demand that.

“The big stumbling-block to this scenario is the cost to the Victorian taxpayer. In 1996, when the race was a combination of a four-day event and corporate sponsorship was far more generous than it is today, it still needed to be underwritten by about $1.7 million AUD. Last year, it was $50 million AUD.

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This highlights the problem with the economic model for hosting a modern GP.
Most GP's are ran at a lost by the hosting government of that country. The governments hopes that they make it up in back end money from tourist, taxes from hotels, and the like along with adding some glamour to their country. But how long can this go own?
Take independent track ownders like Tony George at Indy who has a track and business to run, could never host a current GP with current hosting fees and all money from track signage and TV going to Bernie. GPs now have to be hosted by governments who will soon grow tired of this money losing relationship. Even the new track in Austin, TX that is suppose to host a GP will be propped up by state funds. How many years will those funds be available?

I havent known a f1 season without a grand prix in melbourne as i started seriously watching the gp in 96 so i wud be extremely sad to see it go. Hope they can work something out or is this thier way of putting pressure on bernie?